Saturday, June 26, 2010

Introduction to Charities 101

I am really not a scholar. I have left my books back at university years ago. Nic is the smart one, with the near-perfect scores in his thesis and other written assignments and his super-logical analysis of the situation. Me? Not nearly so. 

But one area of, how shall we call it, public education that is quite lacking in Singapore is the area of charities. What are charities? What is the difference between a charity and an IPC (institute of public character)? Should charities be tax-exempt? I have read many articles on this matter with each giving his or her own well-thought-through but yet still erroneous analysis.

I tried to explain this in my usual rambling roundabout way before. I see now it is a bit TOO rambling. So let me try to break it down for you. :)

What is a charity?
First, you must understand that charity is a noun, but there are several meanings to it. defines this word as:
1) generous actions or donations to aid the poor, ill, or helpless, 
2) something given to a person or persons in need, 
3) a charitable act or work, 
4) a charitable fund, foundation, or institution, 
5) benevolent feeling, esp. toward those in need or in disfavor, 
6) leniency in judging others; forbearance, 
7) Christian love; agape.

So first off, there is a distinction. Charity is not just doing good works, it also means a charitable organization. And therein lies the difference. 

What is a charitable organization?
According to the wiki, a charitable organization is a type of non-profit organization (NPO). The term is relatively general and can technically refer to a public charity (also called "charitable foundation," "public foundation" or simply "foundation") or a private foundation. It differs from other types of NPOs in that its focus is centered around goals of a general philanthropic nature (e.g. charitable, educational, religious, or other activities serving the public interest or common good).

The Charities Unit in Singapore also specifies the kinds of specific charitable objects, and they are in line with those listed above.

So should a religious organization (such as a church, a temple or a mosque) be considered a charitable organization? The answer is an OBVIOUS YES! And all around the world, this is the commonly and generally accepted norm and practice. Such religious organizations, being set up for the purpose of religion, would naturally be expected to spend most of its income on the religion, be it rental of halls for its worship services, winning the lost or other such expenses. 

I have seen some people shake their heads and wag that proverbial finger at the fact that City Harvest Church spends “only” S$2.9 million in their last financial year on local and community charity work, not realizing that #1, this is probably more spending that a lot of MNCs, #2, as a religious charity, they have no obligation to spend anything on other charities. Of course, most large religious charities have an outlet to bless the community outside the four walls of their church or temple, but why the tsk-tsking over S$2.9 million? Sure, some say this is a small figure compared to the church income of more than $40 million over the same financial period. But please. Give me a break. If I earn say $40,000 a year, and I give $2,900 to charity, that to me is a pretty significant sum (about 7% of income)! Would you scoff at me? Would you ask me why only $2,900? Would you tell me to cut back on my shopping or eating out to give more? If you did, I would probably ask you to take a long hike. Hahaha! 

Please don’t make the mistake of looking at how much a charitable organization GIVES to judge whether or not it should be a charity. Charitable status is dependent upon the purpose of that organization. A sports association is also considered a charity. Take any sports association in Singapore (the Netball Association, the Badminton Association) – most are charitable organizations, and if you check their accounts, I am pretty sure that the majority of their expenses are for the purposes of the sport. Not to donate to any other charity. Not to give to the poor. But does that make them non-charities? OF COURSE NOT. The fact that they spend their income on the purposes for which they are set up proves that they are charities.

Should a religious charity be tax-exempt?
This is a much-maligned whipping horse. Let me help to set the record straight.

A charity is tax-exempt. That means it need not pay taxes on the donations received.

A charity is not an IPC (institute of public character). A charity is an organization set up for a charitable object (as mentioned above, religion being one acceptable such object).

According to the Charities Portal, “For an institution/fund to be an IPC, its activities must be beneficial to the community in Singapore as a whole, and not confined to sectional interests or group of persons based on race, creed, belief or religion, unless otherwise approved by the Minister.”

So most religious organizations can not be an IPC, for the simple fact that its activities are mainly confined to its members and congregations, and therefore does not meet the above requirement.
But see, that is okay. A charity need not be an IPC. It does not impact the charity much. The ones impacted are the donors. Donations to IPCs are tax-deductible, donations to charities are not.

So if a charity is tax-exempt, there is no reason to exclude religious charities from this. Why is there a need to do so anyway? The advancement of religion is an accepted charitable object.

How should charities spend their money?
Or in other words… are commercial ventures by charities allowed?

This is a pretty sticky area. Just my two cents. If the commercial venture is in line with the charity’s vision and purpose, and the profits earned are channelled back to the charity for its use… what is the issue here?

A key word bandied around of late is the term “social enterprises.” More and more, people are recognizing that while the purpose of that organization remains for the public good, it uses and applies market-based strategies and business models for self-funding. Nothing wrong with that. In fact, if anything, it is a wise use of the organization’s finances, because a continual income stream assures of longevity in their business of doing good.

Ok, end of my long verbal outburst. I hope this has helped you to understand the matter of charities a bit more! ;)

Oh, and borrowing a line from a well-versed friend of mine…

“Opinions expressed here are my own and do not reflect the views of any organisation I may represent inadvertently.”


Dewi Batrishya said...

whoa.. one thoughtful entry.. ^^

San said...

Hi Dewi! :) Thanks :)

Keng Hoe said...

Awesome! Can ST publish this? Hahaha!

San said...

@Keng Hoe: well the real ST would probably have something wittier like "Pastor preaches in church over weekend" or something along this line. Haha!

Anonymous said...

Should be published in mainstream media. Great article!

Unfortunately, while the news media await an outcome of investigations they feed their readers with whatever sensationalism they can can lay their hands on.

San said...

@Anon: Thanks for your kind words! :) This is a subject that a lot of people aren't very clear of, and unfortunately the media circus hasn't been helpful to clear doubts! Haha!

There is a fine line between investigative reporter and sensationalistic ones, and with mainstream media "endorsing" such tabloid-y but unverified facts by printing and reprinting them, it doesn't help the larger truth much, which I reckon, should be the over-arching aim of the media. :)